The countdown has begun. It’s only a matter of days before Social Security benefits start to rise. While any retiree who receives Social Security will enjoy a nice raise, some will earn more than others.
The maximum monthly Social Security retirement benefit is currently $4,194. That amount will increase to $4,555 in 2023. Do you want this maximum Social Security benefit? Here’s the salary you need.
A not so simple answer
When you retire in 2023, your salary must be $160,200 to collect the maximum Social Security retirement benefit. That is the highest amount for which Social Security taxes are due.
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But making $160,200 over the next year won’t be enough on its own. The Social Security Administration (SSA) uses your highest income over 35 years to calculate your retirement benefit.
No, you don’t have to earn a minimum of $160,200 during your career over 35 years. The Social Security payroll tax cap has changed significantly over time. However, because of this, there is not just one salary level you must achieve to receive the maximum monthly benefit of $4,555. Instead, there are 35 different salary levels that you must have achieved in the past.
The following table shows the maximum amount that will be taxed for Social Security for each year starting in 1973. You can see for yourself whether you have earned enough over 35 years to receive the maximum Social Security retirement benefit.
Another important condition
There is another important condition for receiving the maximum retirement benefit from Social Security that you should know about. You cannot take early retirement at the age of 62. You can’t even retire at your full retirement age, which is 67 for anyone born in 1960 or later. To earn the maximum $4,555 per month, you must wait until age 70 to claim your Social Security retirement benefits.
However, many Americans don’t wait until age 70. Only 10.2% do, according to a recently published article by the National Bureau of Economic Research (NBER). That is usually not the best financial move. In fact, the NBER study found that claiming retirement benefits before age 70 resulted in a median lifetime loss of more than $182,000.
The maximum may not be enough
Striving to receive the maximum retirement benefit from Social Security is a laudable goal. However, the maximum may still not be enough to retire comfortably. The maximum monthly benefit of $4,555 for 2023 is $54,660 per year. That’s just 34% of the aforementioned $160,200 salary.
The reality is that most Americans will have to save for retirement in other ways rather than relying solely on Social Security. It is wise to start saving sooner rather than later. Regardless of when you plan to retire, the countdown is on.
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